Looking for a Way to Improve Your ROA?

Auto recapture is one option to help your credit union increase its ROA.


According to CUNA's 08 economic forecast the average credit union will have earnings of about .53% of their assets. That means a $500 million dollar credit union will earn around $2.6 million dollars.

Also, according to CUNA, the average credit union finances just under 20% of their members car purchases. That means over 80% of members are financing elsewhere. Some were pre-approved at the credit union and the F&I guy converted the member to another lender. Some didn't apply at the credit union thinking they'd apply after they picked out their car and were easy targets at the dealership. The F&I guy's pay is largely commission on financing and ancillaries, so they are great at what they do – financing your members.

Moreover, new auto sales are forecasted for a steep decline in 2008. According to JD Power, new auto sales are forecasted at 12.5 million in 2008 versus 16 million in 2007. With this sharp decrease in overall auto loan activity, your credit union's auto loan market share is more important than ever.

Is it time to throw in the towel and accept things as they are? Heck no! It's time to take your members back! With the addition of an auto loan recapture program, earnings increase to $3.2 million which is a 23% upside swing. It can also be looked at as a 12 basis point increase in ROA moving their ROA up to .64% a 21%, upside swing. Regardless of the size of your credit union, the opportunity to put more auto loans on the books by recapturing members you lost or didn't have a chance at in the first place is enormous. Take a $100 million dollar credit union with 15,000 members. If 75% of the membership is car buyers that's 11,250 members with cars. If 80% are financing elsewhere that's 9,000 lost loans. If your average rollover is 32 months, that's 281 lost loans per month. And you can be sure a good chunk of those loans are at interest rates higher than yours.

Any one of the three credit bureau providers can monitor your membership base to identify which members recently financed elsewhere. In most cases they can back into interest rates so you can target those members that need the most help and best fit your portfolio. Once identified, these members can be contacted with a compelling offer to save money by bringing their loan back to their credit union.

Let's face it, your members joined the credit union for a reason and in most cases it was to gain access to affordable loan rates. The members you aren't serving, because they got TO'd (turned over) to a crafty F&I person, still belong to the credit union, and with the proper advice, will bring their loan back to the credit union. While car purchases slow down, a sound auto loan recapture program can offset the difference and help you grow your portfolio in 2008.

Jeff Frantz is senior vice president of corporate development at Lending Solutions Inc. For questions on the auto loan recapture program or to request a custom proforma, contact Jeff at jfrantz@nlpc.com or 800-937-4249. For additional information, including a standard proforma, click here .



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Aug. 11, 2008


  • Lets not forget that many auto finance companies are either cutting back or going out of the business. Dealers have fewer lenders now and are flipping credit union customers less often. There is no better time for credit unions to pick up market share than right now.
  • I think the article lacks specific tools that outline what challenges credit unions face in overcoming the "hassle factor," and what incentives can be used to mitigate this. It would be foolish, not to mention expensive, to go into an Auto Loan Recapture program without considering how to craft one that will be the best-received vs. test-along-the-way.
  • Excellent strategy to boost your auto loan volume.
  • Excellent strategy to boost your auto loan volume.